Should You Swap Out ExxonMobil for ConocoPhillips?

By Ben Levisohn

Yes, say the folks at Barclays. They took a long, hard look at integrated oil companies like Chevron (CVX) and ConocoPhillips (COP)–but only one came away with a downgrade: ExxonMobil (XOM).

Associated Press

Barclays’ Paul Cheng and team explain why:

We downgrade ExxonMobil to Underweight from Equal Weight primarily due to its relative valuation. The shares are currently trading at a 9% premium to its NAV compared to the group average discount of 17%. Although we have modestly increased our price target to $105 from $100 and set it above its NAV estimate to give credit to the company’s seemingly conservative non-proved resource estimate, we believe the potential upside is limited compared to other names in our coverage. We think the stock will continue to face relative headwinds concerning the lack of meaningful near-term production growth and our belief of a relatively steady high oil price environment. We recommend switching from ExxonMobil to ConocoPhillips, Imperial Oil (IMO), or Suncor. That said, ExxonMobil will likely outperform the group in the event of any unexpected significant negative macro developments given its long held “safe haven” status.

Investors aren’t making much of adistinctions today, however. Shares of ExxonMobil have dropped 1.1% to $103.16 at 1:27 p.m. today, while Chevron has fallen 1% to $133.54, ConocoPhillips has dipped 0.2% to $86.06 and Imperial Oil is off 0.9% at $53.33.

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There are 12 comments

JULY 25, 2014 7:02 P.M.

Will Griffin wrote:

They put out a $141 price target on Chevron. I'm not sure that justifies paying the 15-35% tax you'd pay on swapping out a position in Exxon.

JULY 26, 2014 12:12 A.M.

Oil Junkie wrote:

I have already swapped out Barclays to JP Morgan Chase because of all Barclays' scandals exposed in the past six months. Why should I pay attention to their recommendations in the oil patch which I know so well.

JULY 26, 2014 3:10 A.M.

XOM FOR COP wrote:

No doubt about it ... everything is pointing to much higher stock prices for COP in the coming
year, and with the increased dividend it's a no brainer. Good luck to all of you.

JULY 26, 2014 4:44 A.M.

Tex Rillerson wrote:

Sector analysts have been making this mistake for decades. They are confused about the concept of strong conservative growth and disciplined management versus a quick buck. Notice they failed to mention anything about a 2008 style downside didn't they?

People's interest in growth stocks would not include either of these companies. XOM's credit rating is higher than the US government. COP's is not. Investing in XOM is like getting a 2.7% or better and getting a good nights sleep every night without worry.

My opinion of Barclay's (which was already pretty low) has been taken down a few notches.

JULY 26, 2014 10:03 A.M.

MickinMD wrote:

Coincidental Article. I've owned Exxon Mobilsince it was Exxon in 1994 through it's DRIP plan, adding and occasionally subtracting over the decades. But last year, I joined and started adding to Conoco Phillips through its DRIP: Conoco is different than Exxon in that Conoco is now basically only an exploration/drilling/pumping company with many potentially lucrative finds including four deepwater sites in the Gulf of Mexico. I decided to add a little each month through it's no-purchase-fee DRIP (similar to Exxon's - both are administered by computershare.com) until I have about an equal amount of each one. That will take a couple years of dollar-cost-averaging and somewhere during that time it should become clear if I should continue to hold both or shift all the money into one or the other or elsewhere.

JULY 26, 2014 10:16 A.M.

MickinMD wrote:

I've added more to COP than XOM (through their no-purchase-fee DRIPs) this year, but I've gained 20.5% in COP for 2014 through 7/25 and up 4.7% for XOM. So it doesn't take much gray matter to recommend COP now at the end of July, 2014. I slowed then stopped adding to the XOM DRIP and started regular monthly purchases in the COP no-purchase-fee DRIP on 12/27/13.

It should have been recommended in December or earlier!

JULY 26, 2014 1:19 P.M.

FloydNY wrote:

Why swap? Currently buying cop monthly, and have a nice piece of XOM in my portfolio. Which got there the same way, fee free monthly purchases.

Fee Free = More Growth for ME.......

JULY 26, 2014 3:20 P.M.

Mister Z wrote:

Downgrade XOM but increase the price target.
Where can I get a job like this? Idiots!

JULY 26, 2014 3:46 P.M.

jwa wrote:

worked for Exxon as a blue collar worker and saw first hand how well managed the organization is starting with safety.

JULY 26, 2014 5:50 P.M.

Al wrote:

Too funny. Just last night a financial pundit on NBR was pushing XOM.

Ask 10 analysts the same question and you'll get 10 different answers. Which proves none of them actually knows. They just spew out assumption based opinions to get paid and hope once in while they get luck so they can claim how brilliant they are and should be listened too.

If they truly were brilliant and knew what they where talking about their advice would come with guaranties.

JULY 29, 2014 10:13 A.M.

Kirk Cornwell wrote:

Should I sell my Standard Oil of New Jersey? Gosh, I almost did when they were buying too many plane tickets to Saudi Arabia fifty years ago. Now THAT would have been a mistake.

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Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.